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The Whitbread Book Awards were established in 1971 by the brewery company Whitbread and administered on its behalf by the Booksellers Association of Great Britain and Ireland. The first awards made in 1971 were made in the three separate award categories, the Whitbread Poetry Award, the Whitbread Novel Award and the Whitbread Biography Award. The Poetry award was dropped in 1972 and replaced with a Whitbread Children's Book Award (known in some years as the Whitbread Children's Novel Award). In 1974 a Whitbread First Book Award was made and once more in 1975 never to see the light of day again, although in 1981 the Whitbread First Novel Award was added to the list of categories and has remained ever since.

In 1980 one of the category winners was selected as the Whitbread Book of the Year, but that exercise was not repeated again until 1985, whilst in 1984 there was the one and only instance of the Whitbread Short Story Award (won by Diane Rowe for Tomorrow is Our Permanent Address).

From 1985 onwards the Awards became a settled format with individual awards being made in the five categories for Novel, First Novel, Biography, Children's book and the revived Poetry category, with one of the category winners being selected as the Whitbread Book of the Year. Each category winners received £5000, with the overall winner of the Whitbread Book of the Year receiving an additional £25,000, making it one of most lucrative of all British literary awards.

In December 2005 Whitbread company announced that it was discontinuing its sponsorship of the awards. Having once been a brewery company, it had now sold its brewing interests to the Belgian Interbrew and had turned itself into an hospitality company which owned a number of businesses operating hotels, restaurants and health and fitness clubs, none of which traded under the name of Whitbread. In June 2006 it was then announced that Costa Coffee had taken over ownership over the awards, although since Whitbread actually owns the Costa Coffee chain this is not that much of a difference.

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